re: iron ore pricing for 2006
Or an alternative view ;
10 Jan 2006 00:21 GMT
Australia small coal producers' price settlements not encouraging - UBS SYDNEY (AFX) - Investment bank UBS said reports that small Australian producers of semi-soft coal used in steel making have agreed to substantial price reductions are not encouraging.
Citing Japan's ? Report, which said that some Australian suppliers reached agreement with South Korea's POSCO late last year for a 25 usd per metric ton reduction to 53 usd a ton free-on-board (FOB) for the year starting April 1, ? said forecast coal prices may prove too high.
"With uncertainty over coal pricing and the risks in our view to the downside against current estimates, we believe it is too early to go over weight the coal sector," the firm said.
It said at this stage it still remains premature to say that the general trend of semi-soft coking coal negotiations has been identified because agreements have not yet been reached with major suppliers such as Xstrata Coal, and Rio Tinto.
But, ? said, should the early settlements translate through to benchmark settlements, then it would expect to see earnings lowered, all else being equal.
It said Australia's Mac Coal Ltd would be the most affected by the potential for coal prices to settle below expectations.
? said in its view the market is now in the tail end of the coal cycle with prices almost certainly expected to fall.
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